Having your own home is a sign of financial security. Conversely, being a homeowner is also a responsibility because you have to take care of it. However, most people can’t afford to pay for a house out of their pockets, so a mortgage is the next best solution. There are many types of loans to choose from, and FHA home loans are one.

FHA home loans are from the Federal Housing Administration (FHA). It’s a government agency that insures loans made by FHA-approved lenders. The agency was created to ensure affordable home loans for low-income families and individuals who don’t usually meet the standards of other lending institutions such as banks. Like any other loan, FHA loan applications can be rejected in several ways. These include:

#1 – You Have a Low Credit Score

Generally, a mortgage requires an acceptable credit score to be approved. The same goes for FHA loans, but the threshold is significantly lower. Regardless, a low credit score may not be enough to be approved. Ideally, you’ll need a score of 500 or above to be eligible. However, some lenders may consider lending to you if your credit score is below 500 if you have a compensating factor.

This is important because a low credit score means you’re having a hard time repaying your debts. Most people in financial trouble are likely to be late on their payments. These circumstances may lead to shorter credit history and more outstanding debts than people with a good score. This can make an FHA loan application more difficult.

#2 – You’re Carrying Too Much Debt

Most banks look at your credit score as it is. They don’t include your other debts, such as your car payments and mortgages. However, FHA home loans are different. Applying for an FHA will look at your entire debt profile to determine if you’re highly leveraged. This means it will not only look at your outstanding credit cards and other loans but also how many times you’ve refinanced or taken out a second mortgage.

If you’re carrying too much debt, FHA may reject your application because it indicates that you might not be able to make your FHA loan payments. Credit scores are just one piece of the puzzle, and the agency considers other contingent factors such as the loan amount, your debt load, and your current income.

#3 – You Don’t Have Enough Funds

The FHA accepts cash-out refinances as well as conventional loans. You can refinance with the agency, but it can also be a good source for first-time homebuyers. However, the agency only approves your loan application if you have sufficient income to pay for the loan. This doesn’t necessarily mean you need to be making six figures. But, it does mean you should have enough income to pay for your monthly mortgage and other expenses. Otherwise, you could face foreclosure and lose your home.

Additionally, you’ll need to show proof of enough funds in your bank account at the time of application. This is necessary to demonstrate to the lender that you’re capable of paying for your mortgage. This doesn’t only apply to the down payment. You may also need to provide proof of funds for the remaining amount of the loan.

#4 – You Lack Down Payment

Mortgages require a down payment because you’re borrowing a large amount of money that you should have the means to pay for. FHA loans also require down payments, even a tiny amount. Most FHA loans have minimum down payments ranging from 3 to 10 percent, depending on the loan. The agency allows you to put 10% down if you have a credit score of 500 or above, but it requires a minimum of 3.5% down payment for all other applicants. If you don’t have it, your loan application will likely be declined.


FHA home loans make homeownership more affordable for low-income families and individuals with low credit scores. They’re a good source for rebuilding your credit or getting a mortgage for the first time. However, the agency has strict requirements that must be met by the borrower to be approved, so be sure to follow them.

If you’re looking for mortgages in Colorado Springs, Total Lending Concepts can help you! We understand our clients’ financial circumstances, so we provide comprehensive solutions to ensure they’ll be one step closer to their dream home at affordable rates with reasonable terms. Reach out today to learn more!